The Robinhood logo is displayed on a smartphone in an arranged photo.
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Shares of GameStop, AMC and others jumped to extended trading on Thursday, after Robinhood said it would resume limited restricted securities trading earlier on Friday.
“Starting tomorrow, we intend to allow limited purchases of these securities. We will continue to monitor the situation and make adjustments as necessary,” Robinhood said in a statement.
GameStop shares returned after trading hours after the Robinhood decision. The stock gained 28% to trade at $ 247 in trading after business hours, after closing 44% at $ 193.60 in normal Thursday hours.
The company said their decision to restrict trading – which annoyed many users – was to comply with the capital requirements imposed by the SEC for broker dealers.
“These requirements exist to protect investors and markets and we take our responsibilities to take them seriously, including through the measures we have taken today,” the company said.
Amid a frenzy in retail investor trading, Robinhood, among other retail brokerages, restricted trading on several names on Thursday. The free stock trading application said that in some cases, investors will only be able to sell their positions and not open new ones.
In addition to GameStop, the restricted trading sent shares of AMC Entertainment and BlackBerry, which fell 56% and 41%, respectively, on Thursday.
Interactive Brokers has taken similar steps and both it and Robinhood have raised the margin requirements for certain securities. TD Ameritrade and Charles Schwab raised their margin requirements on Wednesday.
Increasing margin requirements increases how much money an investor who uses leverage and derivatives in the brokerage account must have after a purchase of shares.
The influence of retail investors – the most obvious in GameStop – has captivated the street in recent days and speaks to a new class of traders who have grown up in the midst of the pandemic.
Individual investors create short pressures by gathering in the name that hedge funds bet, forcing funds to rush to cover their losses. This usually pushes the actions even higher. Retail investors promote their work on the WallStreetBets Reddit board, which has over 3 million members. Some see it as a small retail investor pushing back against the Wall Street institution.
Against the background of the meteor shower – and then it decreases – some parliamentarians demand an investigation. Amid calls from lawmakers, Democratic leaders on the House Financial Services Committee and the Senate Banking Committee said they would hold hearings.
Here is the full statement from Robinhood:
“In the last year, we’ve seen financial markets become a voice for the voiceless. We’ve seen a new generation of people enter the markets, provoking conversations about what it means to be an investor. Our clients have shown the world that investing is for everyone. the world – not just for institutional investors and hedge funds.
Against the background of the extraordinary circumstances on the market this week, we made a difficult decision today to temporarily limit the purchase of certain securities. As a brokerage firm, we have many financial requirements, including net SEC capital bonds and clearing house deposits. Some of these requirements fluctuate based on market volatility and can be substantial in today’s environment. These requirements exist to protect investors and markets and we take our responsibilities to take them seriously, including through the measures we have taken today.
Starting tomorrow, we intend to allow limited purchases of these securities. We will continue to monitor the situation and make adjustments as necessary.
To be clear, this was a risk management decision and was not taken in the direction of the market decision makers we are heading towards. We are beginning to open trading for some of these securities responsibly.
We support our customers and the freedom of retail investors to shape their own financial future. The democratization of finance has been our guiding star since our earliest days. We will continue to build products that give more people – not fewer – access to our financial system. We will continue to monitor market conditions as we seek to restore full trading of these securities. We’ll update this Help Center article with the latest changes.
We are deeply grateful to our customers. “
– CNG’s Maggie Fitzgerald contributed to the reporting.